Fidelity & Deposit Co. of Maryland v. Deposit Guaranty Bank & Trust Co.

• Decision Date: 05 December 1932
• Docket Number: 30284
• Parties: FIDELITY & DEPOSIT CO. OF MARYLAND v. DEPOSIT GUARANTY BANK & TRUST CO. et al
• Court: Mississippi Supreme Court

144 So. 700

164 Miss. 286

FIDELITY & DEPOSIT CO. OF MARYLAND v. DEPOSIT GUARANTY BANK & TRUST CO. et al

No. 30284

Supreme Court of Mississippi

December 5, 1932

Division B

1. BANKS AND BANKING.

Statute authorizing national bank to act as guardian makes national bank so acting subject to state laws (12 U.S.C. A., section 248 (k)).

2. BANKS AND BANKING.

National bank acting as guardian treating ward's funds as ordinary deposit held liable for eight per cent. interest up to time bank closed (Code 1930, section 1885; 12 U.S.C. A., section 248 (k)).

3. PRINCIPAL AND SURETY.

Where principal becomes insolvent before debt is paid, surety may compel payment of debt from principal's assets.

4. PRINCIPAL AND SURETY.

Where bank, guardian, became insolvent, but receiver paid principal to new guardian, surety held entitled to compel bank or legal representative to pay interest on guardianship funds (Code 1930, section 1885).

5. BANKS AND BANKING.

Claim against insolvent bank as guardian for interest on guardianship funds should be paid pro rata with other unsecured creditors and depositors (Code 1930, section 1885; 12 U.S.C. A., section 194).

6. BANKS AND BANKING.

In suit by new guardian to recover from insolvent bank, former guardian, interest upon guardianship funds, bank was unnecessary party; receiver being representative of all parties (Code 1930, section 1885; 12 U.S.C. A., section 194).

HON. V J. STRICKER, Chancellor.

APPEAL from chancery court of Hinds county, HON. V. J. STRICKER Chancellor.

Suit by the Deposit Guaranty Bank & Trust Company, guardian, against Fidelity & Deposit Company of Maryland, and others. From the decree, defendant named appeals. Reversed and remanded.

Reversed and remanded.

Watkins, Watkins & Eager, of Jackson, for appellant.

Under the Mississippi statute, when the surety paid over to the guardian the sum due under the decree it thereby became, under the Mississippi statute, Sections 2959 and 2961, Code of 1930, subrogated to the rights of each of said minors, and their guardian as against the First National Bank of Jackson, Mississippi.

When the First National Bank qualified as guardian of said minors it became automatically liable for interest on such funds as should thereafter come into its hands, at the rate of eight (8%) per centum per annum, in the absence of an order of the chancery court authorizing such funds to be invested at a lesser rate of interest.

Section 1885, Code of 1930.

The distribution of the assets of the First National Bank is governed by the Federal statute. R. S. 5236, sec. 194, Title 12, U.S.C. A.

The assets of a national bank are to be ratably divided and appropriated to the payment of all its legal liabilities, whether such liabilities are debts, technically so called, or result from the nonfeasance or malfeasance of the association in respect of its binding obligations and duties.

Turner v. Keokuk National Bank, 26 Iowa 562.

Where the insolvency and suspension of a bank put it out of its power to perform a contract, no further fact is necessary to fix its liability for a breach of such contract.

Chemical National Bank v. World's Columbian Exposition, 170 Ill. 82, 48 N.E. 331.

The receiver is liable for interest up to the date of the suspension of the bank, but not after.

White v. Knox, 111 U.S. 784, 29 L.Ed. 603; American National Bank v. Williams, 101 F. 943.

A surety against whom judgment has been obtained is entitled, even before paying the debt, to bring a bill asking that a mortgage given by the principal to the creditor be applied in payment of the debt, and that upon payment of the debt he shall have the benefit of the mortgage security, and although the surety on a note given for purchase money due for land cannot be subrogated to the lien on the land until he has paid the debts to the creditor, equity will enforce the lien in an action on the note, to save a multiplicity of suits, especially when the creditor asks that it should be done.

37 Cyc. 407.

Where by mutual mistake, or by reason of representation of a creditor part payment is believed to be full payment, the person making it is entitled to subrogation, the creditor being estopped to deny his right thereof.

Carson v. Conner, 83 Tex. 26, 18 S.W. 668.

Subrogation is granted to prevent a multiplicity of suits, or a circuity of action where no detriment would result to the creditor from allowing the same.

State ex rel. Lux v. Atkins, 53 Ariz. 1303, 13 S.W. 1097; Lusk v. Hopper, 3 Busk. 179.

The relationship of debtor and creditor exists between the principal and surety from the time the contract of indemnity was entered into.

21 R. C. L., sec. 156, page 1120.

If a principal becomes insolvent after the debt is due and before it is paid, his surety has an immediate equity against him and actual payment need not be made by the surety to enable him to sustain an action to compel payment of the debt out of his principal's assets.

21 R. C. L., page 1115, sec. 151.

Before maturity of the debt or accrual of liability the surety has no right of action in equity to be indemnified against apprehended danger of loss by reason of his undertaking. After maturity, however, although he has not been troubled by the creditor, he has the right, before payment, to go into a court of equity, at any time to compel payment of the debt by the principal, or from the estate of the principal, or to be secured against loss. The doctrine in such case rests upon the simple right, as between the principal and surety, that the surety has to be protected by the principal.

50 C. J., page 244.

The right acquired by a surety company to a fund retained by a county until completion of a contract, arose under equitable subrogation, which originated on the day of execution of the bond of the contractor.

Canton Exchange Bank v. Yazoo County, 144 Miss. 579, 109 So. 1.

Fulton Thompson, and R. H. and J. H. Thompson, of Jackson, for appellee.

The right of subrogation can exist only where the surety has actually paid, or has secured the payment of the debt due by his principal.

Bank of England v. Tarleton, 23 Miss. 173.

The right of a surety on a bond to be subrogated for the obligee in a right of action against one wrongfully causing the liability is founded on payment by the surety to the obligee, and does not come into existence except on full payment of the loss indemnified against, since the cause of action cannot be split.

United States Fidelity & Guaranty Company v. Union Bank & Trust Company, 228 F. 448; Magee v. Leggett, 48 Miss. 139.

The receiver of the First National Bank is an officer of the Federal Government and as such, is not amenable to the Mississippi statute requiring the investment by a guardian of the ward's funds.

The receiver was not the guardian of the wards and could not act as such and of this fact he advised the chancery court and asked to be relieved and a successor fiduciary appointed.

A creditor of an insolvent national bank, who establishes his debt by suit and judgment after the refusal by the Comptroller of the Currency to allow it, is entitled to share in dividends upon the debt and interest so established as of the day of the failure of the bank; and not upon the basis of the judgment if it includes interest subsequent to that date.

White v. Knox, Comptroller, 111 U.S. 784, 28 L.Ed. 603.

The right of subrogation does not arise in favor of a surety until he has actually paid the debt for which he is liable as surety; the right does not accrue upon a partial payment by the surety, until the creditor is wholly satisfied. Even if a surety is liable only for a part of the debt, and pays that part for which he is liable, he cannot be subrogated to the securities held by the creditor until the whole demand of the creditor is satisfied. Where the surety is allowed by bill in equity after the debt has become due to compel the creditor to enforce his demand against the principal debtor, yet he cannot be subrogated to the creditor's liens, securities, and equities for the debt until he has actually paid it.

Sheldon on Subrogation (2 Ed.), par. 127.

Subrogation rests upon purely equitable grounds, and cannot be enforced against superior equities and subrogation is never allowed to the prejudice of a creditor.

Musgrave v. Dickson, 51 Am. St. Rep. 65.

The distribution of the assets of an insolvent national banking association is governed by United States Revised Statutes No. 5236, Section 194, Title 12, U. S. Code Annotated.

OPINION

Anderson, J.

Appellee Deposit Guaranty Bank & Trust Company filed its bill in the chancery court of Hinds county against the First National Bank of Jackson, and J. R. Stevens, receiver of that bank and appellant Fidelity & Deposit Company of Maryland as surety on two guardians' bonds executed by that bank as guardian for Mansfield Dendy and Estella Dendy, minors, to recover eight per cent interest on the funds in the custody of said bank as such guardian from the time they were received by the guardian. Appellant answered and made its answer a cross-bill praying that, if the court should find any liability on the part of the First National Bank and appellant as such surety, it render a decree against J. R. Stevens, receiver of the First National Bank, for the amount due. The cause was heard on amended bill, answer of the defendants, except the First National Bank, and a cross-bill of appellant, and proofs, resulting in a decree against appellant as surety for the interest, as prayed for, and dismissing the amended bill as to Stevens, the receiver of the...